Mike and Linda, who are not married to each other, are starting a house keeping business. The business will provide periodic cleaning services to residential homeowners. From time to time it is expected that there may be one or more of the residents at the home when Mike and Linda arrive to start their work.

They will provide their own cleaning materials including, vacuum cleaner, floor mops and buckets, rags, cleaning solutions, furniture oils, and feather dusters. They sell no products but only provide services.

They come to you for advice on starting their business. They have been discussing various entity types but are not sure of which way to go. They realize, being in the personal residence of another, they are exposed to risks which could make them liable to their customer. They are also concerned about paying the least about on income tax possible. Linda, who had a couple of accounting classes in high school and college, feels she is capable to do their accounting. She is just not sure which accounting software if any to use.

 
They decided on a Limited Liability Company.

 
Identify which basis of accounting would be best suited for the business, (cash or accrual) and explain your decision.
 

Identify the appropriate income tax form which will be used to report profit or loss based on the entity type selected.